PIA Has Made Upstream Environment More Efficient, Attractive To Investors—Komolafe

The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission, Engr Gbenga Komolafe has said that the Petroleum Industry Act which was signed by President Muhammadu Buhari has made the upstream sector of the oil and gas industry more operationally efficient, safe and attractive to investors.

He said this at a speech delivered during the 2022 Nigerian Oil and Gas Conference holding in Abuja with the theme, “Funding the Nigerian energy mix for sustainable economic growth.”

Speaking on the sub theme, “Providing regulatory oversight in the PIA era,” Komolafe said it is remarkable that the Nigerian oil and gas industry has transformed from a background of regulatory uncertainties to a sector governed by clear rules and regulations with the PIA.

According to him, the PIA, 2021 provides for administrative, institutional governance, attractive fiscal regimes, and mechanisms for improved health, safety, and environment and achieving peaceful co-existence between operators and host communities.

Specifically, the Upstream Regulatory Commission Boss said consistent with the statutory regulatory mandates of the Nigerian Upstream Petroleum Regulatory Commission, the Act empowers the Commission on technical and commercial regulation of the Upstream petroleum activities in a manner to ensure sustainable hydrocarbon exploration and production at optimum cost, dealing with issues of environmental remediation, decommissioning, and abandonment, and setting up of Host Community Development Trust.

Furthermore, he told participants that the PIA 2021 has introduced incentives aimed at growing reserves and increasing Nigeria’s daily production towards attaining the government’s aspiration of 40 billion barrels and 220TCF of oil and gas reserves respectively and three million bopd production target.

The sixth schedule of the Act, he added, provides for production allowance wherein performance in terms of production milestone is rewarded.

He said, “In a clear departure from the past, the PIA, 2021 has introduced a mandatory Decommissioning and Abandonment Fund prescribed under Section 232 and 233, adoption of Grid System for Acreages under Section 69, Host Communities Development Trust under Chapter 3 that has replaced MOUs and GMOUs.

“These are aimed at achieving operational efficiency, higher productivity, cost optimization, cleaner and safe upstream environment.

“These sweeping reforms are geared towards creating additional opportunities for new investments and higher revenue for both government and investors.”

He said since take-off, the Commission has been working diligently in developing necessary Regulations aimed at giving meaning to the intent and letters of the PIA, 2021.

To ensure fairness, equity, and, justice, he explained further that the Act provides under Section 216 that a stakeholders’ consultation forum be held before the finalization of the regulation.

In compliance with the specific provisions of the Act, Komolafe said the Commission has held various Stakeholders’ consultative fora before finalizing six priority Regulations comprising the Nigeria Upstream Host Communities Development Regulations, Nigeria Upstream Fees and Rents Regulations, Nigeria Royalty Regulations, Conversion and Renewal Regulations, Domestic Gas Delivery Obligations Regulations and Licensing Round Regulations.

He added, “The PIA, 2021 recognizes the immense importance of host communities and dedicated the entire Chapter three of the Act to Host Communities Development.

“The objectives as stated in Section 234(1) of the Act are to foster sustainable shared prosperity and provide direct social and economic benefits from petroleum operations to host communities while enhancing peaceful and harmonious coexistence between Settlors (operators) and host communities.

“Indeed, it is noteworthy that the Commission has made a tremendous stride by unveiling on June 28th, 2022, the Nigeria Upstream Host Communities Development Regulations and Procedure Guide to serve as a navigational aid for the implementation of the Host Community Development Trust (HCDT) in line with the provisions of Section 235 of the PIA, 2021.”

He stated that the Act has also made provision for existing producing marginal field operators to be granted a separate Petroleum Mining Lease (PML) after conversion.

Likewise, he added that any discovery declared as a marginal field prior to 1st January 2021 and not producing would be converted to Petroleum Prospecting License (PPL) and be issued Model Licence and contract in compliance with Sections 94(1)(2) and 85 of the PIA.

“The Commission in its regulatory focus is currently engaging operators on the review of field development plans, identifying declining and shut-in wells aimed at enhancing oil and gas production optimization, gas flare elimination and monetization.

“Furthermore, in the Post PIA regulatory environment, gas has been accorded robust focus. Good enough for Nigeria, gas has equally been adopted as a transition fuel in the energy transition regime.

“The Commission is making a concerted regulatory drive towards effective exploitation and monetization of our gas resources in line with Section 108 of the Act,” he added.

He concluded by saying that the Commission has effectively been deploying its statutory powers within the PIA environment to ensure an effective and predictable regulatory environment in the sector.